Rex Gooch | vice president of product strategy, FIS
June 26, 2020
Amid the turmoil of the global pandemic, broker-dealers have worked hard to meet the strict deadline for compliance with Regulation Best Interest (Reg BI).
Now, as they look to refine their processes, are firms letting entrenched business practices stand in the way of real, long-term transformation?
So far, broker-dealers have had little choice but to get their processes in order fast – and make sure they can meet Reg BI’s disclosure, care, conflict of interest and compliance obligations.
For compliance on day one, most firms have had to make quick decisions on the target state they need to achieve for Reg BI. The priority has been to correctly interpret and meet the baseline requirements and avoid potential penalties.
The mechanisms and processes that broker-dealers have put in place to date will have them helped fulfill Reg BI’s key obligations on time. But in the long term, they are likely to leave room for improvement – especially when it comes to automation and efficiency.
That means the next, no less complex challenge will be to develop more effective, easily maintainable approaches to achieving compliance. Reg BI is going nowhere – and firms should use the coming months and years to perfect the processes they’ve put in place to achieve day one compliance.
The best way to do all that is with automated technology, which can both capture and demonstrate the fact that you're following procedures to the letter, at the pre-sale, point-of-sale and post-sale stages of the customer relationship. But to get the best from a solution, remember that you may need to actually adapt your processes first.
Although you clearly need technology to meet your needs, you shouldn’t always try to bend it to your way of doing business, especially where compliance is concerned. Modify it too much and you’ll have transformed your off-the-shelf solution into custom technology that ends up being expensive to develop, implement and maintain.
But it’s not all about costs. In the case of a mandate like Reg BI, it’s more important than ever to adapt your processes to industry-standard technology. The most expert vendors develop solutions strictly to follow industry best practice – and changing pre-designed processes means exposing yourself to additional scrutiny.
Compliance, after all, isn’t about standing out: it’s about toeing the line and avoiding exposure by doing the same right thing as your competitors.
So, let RegTech be your guide to sustainable Reg BI compliance – and stick to the best practices that your systems provide.